On a visit to Asharq Al Awsat’s offices in London , Abdullah bin Saleh bin Jumah, the Chairman of Aramco defined three aspects to the Saudi Arabian company’s business: the world dimension, the local dimension, and the commercial dimension. He explained, in a lengthy interview, that development projects currently being carried out aim at supporting the local Saudi economy and preserving the stability of the global economy.
Currently, the Chairman added, Saudi Aramco produces 10.5million oil barrels per day and work is being completed to increase production to 12 million barrels, while an ambitious plan is in place to raise the level to 15 million per day, if the market demands it. This increase in production is in line with the huge volume of oil reserves in the Kingdom and the commitment to safeguard them for future generations.
Bin Jumah also explained the security measures taken by Aramco to protect its oil installations, revealing that the company currently employs five thousand security guards to protect its sites. In his interview, the Chairam also disclosed the previously secret conclusions of the conference held in the Shiba region of the Rub Al Khali (The Empty Quarter Desert) in Saudi Arabia .
Asharq Al Awsat is publishing notes from the meeting between the Chairman of Saudi Aramco and its editorial staff in London .
According to bin Jumah, because of the current changes in the oil markets and developments around the world, the oil sector, and more particularly, Aramco, have come under increasing spotlight in recent months. The company now operates in three different, yet interconnected, dimensions: world, local, and commercial.
Aramco is the largest oil company in the world with a current production of 10.5 million barrels per day. Work is being completed to increase production to 12 million barrels, while an ambitious plan is in place to raise the level to 15 million per day, to be maintained for 50 years or even more. Given the size of the company and its reputation, Aramco is eager to sustain the level of production without adversely affecting the country’s oil reserves.
With relation to the local operation, bin Jumah said that
Saudi Aramco’s commercial activities represent between 35% and 40% of the Kingdom’s gross national product and approximately 70% of the state income. It is, therefore, the Saudi economy’s main engine.
Aramco employs more Saudi workers than any other business, bar government administrations. Human capacity building is, as such, crucial for the company. It has a workforce of fifty five thousand, of which 86% are Saudi nationals. In bin Jumah’s words, the company has achieved great strides in training the Kingdom’s citizens, with oil and gas production, and management positions almost exclusively held by Saudis, while taking into consideration the need for variety and know-how.
This, bin Jumah explained to Asharq Al Awsat, is at a time when the private sector in the Kingdom is facing challenges to “Saudize” its workforce and create new job opportunities. With training a major problem, Aramco has taken the lead and opened centers in its offices to train the Saudi contractors it has dealings with. The company is also committed to employing a growing number of Saudi nationals in all its operations, with aim to achieve an even higher percentage than the one imposed in government circles. There have been a few complications, but new employers, after being offered training and support, are increasingly successful.
On the subject of the need for local investments and encouraging foreign investment, the Chairman bin Jumah said that Aramco “invests billions of dollars in the oil and gas sectors and follows a five year plan that it draws to regulate future investments.”
For the past ten years, the capital for the company’s five year plan has hovered between 15 and 20 billion dollars US. This amount is projected to increase in line with a plan to boost energy production, to promote the national economy and bigger revenues to the Kingdom. At the same time, Saudi Aramco is actively encouraging foreign investments. For example, bin Jumah continued, one of the biggest projects the company is currently involved in is a scheme to expand and develop the Rabigh refinery with Japanese investors. In its current state, Rabigh produces 400 thousand barrels a day. Expansion will allow us to increase production to satisfy local market demands of fuel. Aramco also plans to build petrochemical factories in the complex, to a total cost between five and seven billion dollars US. This project will stimulate the local economy and ensure resource diversification. After its completion, “we plan to sell some shares to the public”, bin Jumah added.
Another example of Saudi Aramco’s efforts to provide substantial investment opportunities, he said, is its latest efforts to market a giant project to build a refinery for export only, inside the Kingdom. Bin Jumah told of inviting 35 of the world’s biggest companies in the field of oil production to invest in this venture. The aim is for the refinery to produce four hundred thousand barrels per day and to be highly developed. “We are thinking of building it by the harbour of the Western city of Yunbu , but there’s still the possibility of the refinery being in the Eastern region.” The Chairman indicated that, depending on the level of support from investors, a refinery could be set up in the East and another in the West, because our review of the world market has indicated that refineries are very profitable. In the future, when the world suffers from a shortage of refineries, Aramco will benefit from an increase in profit from having the lion’s share of the market. This planning, bin Jumah indicated, is part of the company’s efforts to promote the local economy and move it forward. In this respect, Aramco intends to follow the BOT model and encourage local and international investment in its projects, as it did last year when it sought to execute projects to produce electricity and steam to meet its demands, with a cost of five hundred million dollars US.
As for the company’s commercial dimension, bin Jumah said that, despite being owned by the Saudi government, Aramco follows a commercial profit making ethos in doing business. “We seek to enhance our economic capabilities and to modernize the workplace in order to achieve more, with fewer resources, whilst ensuring we do not employ more than the work requires”, the Chairman added. Moreover, the company is involved in increasing employee productivity.
There is another important aspect to Aramco’s commercial work, which I have previously alluded to, bin Jumah revealed. It is the relationship between the company and the government and the administrative system the company ascribes to, known in business circles as methods of corporate governance. Saudi Aramco, in this respect, is unique between government-owned national petroleum companies. Bin Jumah told Asharq Al Awsat the company owes its distinguished position to the clear framework the Saudi government had put in place, which includes the principle of non-interference of the policy making and legislative branches of the government in the day to day activities of the company. The relationship between Aramco and the Saudi authorities is managed, bin Jumah added, by the Board of Directors, which consists of representatives from inside and outside of government, with the Minster for Oil affairs, the engineer Ali Naimi, at its helm. The Ministry for Oil and Minerals is the first point of contact with Aramco, he also said.
The government in Riyadh , bin Jumah indicated, is keen to see Aramco operate in a professional manner according to the highest international standards. The Board, therefore, monitors Aramco’s affairs and holds the company to account, if need be. Like any major companybin Jumah said, Saudi Aramco, has internal and external auditors because it seeks to set an example to other national businesses.
In the following section, Chairman bin Jumah answers a few questions Asharq Al Awsat asked him during his visit on security, the workforce, and the secrets to his success.
Q: Can you provide us with information on Aramco’s security operations?
A: With regard to our security concerns, they are related to the wider situation of law and order which is very essential to the company. One of our concerns at Aramco is to protect the workforce and its belongings. Because of the line of work we are involved in, accidents are likely to occur given the material we extract and produce, using a variety of methods that require pressure, heat and changes in temperature. Safety features prominently in our plans, our training and programs, as well as in monitoring our work. Safety in the workplace overlaps with security measures that we stringently apply to protect our harbors and facilities and preserve them.
The security measures we currently follow are not recent reactions to latest the terrorist attacks in the Kingdom but a continuation of long-standing efforts to secure our property. All the vital facilities are protected with high walls armed with the latest technology to prevent access to those without authorization. Only those who have electronic smart cards can enter the sites. We are also able to monitor the whereabouts and identity of those inside the buildings. Security measures were drawn up with the help of the Ministry of Interior and the Ministry for Oil and Minerals some time ago.
Aramco also has patrols on constant observation missions on the ground, in the sea, and in the air. In its harbors, for example, the company employs security boats to monitor the site around the clock, while helicopters hover over all the facilities. Unannounced security visits are undertaken, periodically, to all vital sites. Aramco employed over five thousand men to secure its industries, before the terrorist incidents, and since. In addition, a significant number of security personnel from the government and the military support the company’s efforts.
I would also like to mention that infrastructure, whether in the shape of pipelines, production plants, or refineries, can be substituted one for another. Saudi Aramco does not rely on one and only production like and so, if problems occur, the company will not halt its production because it can count on other substitutes with its giant production system, which might be the largest of its kind.
If one is to suppose that the capacity to export from the Persian Gulf region broke down, Aramco is capable of pump five million barrels a day through the Red Sea , given that pipelines are distributed across the Kingdom and constantly tested. The company is always carrying out hypothetical experiments: What if an explosion occurred in this place? What if the line of production broke down in another place? With industrial accidents likely to be worse than acts of vandalism, The Company is always examining different scenarios. We aim to always be ready for an eventuality. Since its inception, almost seventy years ago, Aramco has never been late in delivering Saudi oil to customers all over the world.
Q: The world is in the midst of a refining crisis because ageing refineries are no longer being restored, due to environmental concerns, and new refineries are not able to meet demand. What is Saudi Aramco’s strategy? Is there a role for the Saudi sector in this respect?
A: Let me start off by saying that refining oil is not a very profitable activity. If we look at the past twenty five years, the investment return for refineries is close to 8%. This represents limited revenue but, nevertheless, refineries are essential and necessary if crude oil is to be sold and profit made.
Another important point that needs to be remembered is that most countries regard oil refining as a strategic issue not an economic one. This explains why some governments support the building of refineries to ensure the minimum local needs are provided, so as not to wholly depend on fluctuations in the oil market. Other countries do not have the choice and building refineries on its territory becomes a strategic issue.
The Kingdom has a total of five refineries belonging to Aramco in Ras Tora, Riyadh , Yunbu, Rabigh, and Jeddah. Their total production is production is a million and one hundred thousand barrels per day. In addition, there are two export refineries, one at Yunbu, in partnership with Exxon Mobile, with over three hundred thousand barrels produced every day, and the second in collaboration with Shell at Jubeil, with a similar production level. The initial plan was to establish refineries across Saudi Arabia because the Kingdom is a big energy consumer. Aramco also has a stake in other refineries, across the world.
Our strategy in investing in refineries is based on our wish to develop our presence as a major actor on the global market and to ensure long term access to sell our crude oil.
Given that profits from refineries increase when they are connected and integrated with petrochemical plants, Aramco has entered into a joint investment project with China , to integrate both businesses.
We believe that there will be a global shortage in refineries in the not so distant future and want to seize the chance to increase our share of the market. This is why we’ve developed plans to build a refinery for export purposes inside the Kingdom.
With regard to the private sector, we encourage private companies of working with us. In our latest investment plans, some projects stipulate that sale of shares to private investors. Saudi Aramco has an agreement with the Japanese Company Sumitomo, our partner in our plans to develop the Rabigh refinery to sold shares to the Saudi private sector, two or three years after the project is completed.
Q: Aramco has had a great impact in human capacity building in the Eastern Region, since the 1950s and helped create a new generation of contractors and businessmen through its international projects. Is this still going on to this day?
A: Our activities are continuing, with added momentum! When Aramco was still a US-owned company, it was an exclusively producing company, with the owners responsible for marketing and selling the product. Saudi Aramco, however, has developed its capabilities and expanded to become a global company, with offices across the world. We are now present in Huston, Washington DC, New York City, Tokyo, Beijing, Singapore, Holland, and, of course, London. We market our products and sell directly to customers, without needing middlemen. Saudi Arabia ’s crude oil is not sold on the market, but according to agreements.
There is no doubt that Aramco is a dependable oil supplier, especially given the corporation’s excellent reputation. We didn’t want to rest on our laurels so commissioned a new fleet of ships and oil tankers to be built. Almost all of the oil we sell is shipped from our own harbors, with some is transported in giant tankers after being divided into smaller amounts to be sent to lesser consumers. We also have storage facilities in Rotterdam and in the Caribbean used as temporary space before the crude oil is sold off.
As for the situation inside Aramco, we face a daily challenge of another kind; once the oil is shipped, the workers in the harbor will feel that their work is finished. Our message to our employees is simple: with a workforce of fifty five thousand, each employee can contribute to our success and, on conversely, to failure. On my field visits, I tell them this and add that, if we are complete our assigned tasks successfully, the result will show on the New York stock exchange the next day. We value every employee because each person represents a ring in a long chain that connects us with global markets. If any one ring breaks, so will the chain.
There is also the important subject of work hours to contend with. At Aramco we start at 7am everyday. As the Chairman, I am in the office by 6:30 every morning and do not leave until 4pm , sometimes even 7pm , because I am aware that it is important for other employees not to see their manager before them.
In fact, discipline in the company is crucial, with justice and equality among employees being equally important. It is possible to find two employees who graduated from the same university and were appointed at the same time, yet, twenty years later, one has been promoted whilst the other hasn’t progressed in his position. Age is not an important factor in the Saudi Aramco hierarchy; young people can progress rapidly in various positions, while other older men and women remain in the same jobs. What matters is effort.
Aramco is one of the largest companies in the world to invest in training and development but we have found that training, in its traditional aspect might not be enough for the demands of an ever changing 21 st century.
For example, I am unable to tell an employee everything he ought to know on the latest developments in Japan or in China or in the global markets. Previously, we used to give each employee the necessary information for the job, leaving out the one hundred things or more that they might need to know.
In order to remedy this shortcoming and increase the knowledge of our employees, Aramco released a system for self- improvement in 2001, in all our offices and branches, with electronic equipment known as education centers. In this new set up, the employee can refer to a compact disc (CD) to start a training course in a variety of subjects such as” administration, engineering, or technology, which might be needed to increase his skills and knowledge. We also provided internet access to all our offices and our employees’ homes, with some now studying degrees online.
Nowadays, when you meet Saudi Aramco employees, you notice the difference. While 10 or 15 years ago workers were highly specialized but knew little more than the daily requirements to their jobs, nowadays, the new breed of young men, aged 18 or 20, who work in the factories, compete among each other for ways to develop the company, diminish expenses and increase revenue.
We have encouraged our employees to be creative and inventive and, because we believe the human mind has no limits, we’ve given them the confidence to be open-minded.
Let me tell you an anecdote that occurred shortly after I became Chairman of the company. At a seminar, I was asked how I’d like to be remembered. I responded by saying I wanted to be known for releasing the genie from its bottle. By that I meant freeing the giant capacities of the human mind so that employees think freely during work and after it, using inventive methods in facing challenges.
In 2002, Aramco’s “year of invention”, we developed a system to administer ideas and encouraged each employee to take part and submit an idea that can improve the corporation’s performance and increase productivity. We’ve received, until now, over twenty five thousand suggestions! Based on our calculations, we believe that approximately 7% of ideas have been applied, to a cost of six hundred million dollars in savings.
In that same year, in October, the company embarked on anew road when it took the directors to the Shiba region in the Empty Quarter Desert in the Kingdom’s interior. We met, in isolation, for three days and held several workshops for strategic planning for the next five years. We asked ourselves what the challenges will be in 30 years time. How can Aramco progress in the future? What does the company need to achieve, beyond its daily operations, to prosper?
After much deliberation, the participants agreed on a number of ideas on the company’s local role, its position in the world, and ways to prepare its workforce for the future. Everyone concurred that the corporation needed a new vision to carry it into the 21 st century. We asked ourselves if the current training program would be appropriate thirty years from now and whether work priorities and the current system were appropriate or not.
The conclusions of these meetings are currently being put into place.
In addition, participants analyzed ways to support the Saudi economy with, as a result, a new strategic plan being presented and novel ideas suggested to our the entire workforce. At the end of these meetings, Aramco established a sector within the company for innovation and new ideas, under the supervision of the Vice Chairman.
New ideas and directions emerged, one of which is the project of developing Rabigh refinery, and the other working with the private sector and local contractors and young businessmen to support the Saudi economy.
In Shiba, we held a series debates with members of the Assembly of Young Businessmen, which has a branch in the Kingdom, and members of the Assembly for Institutional Learning, as part of our program to look into ways to develop the local economy. We shared with them Aramco’s predictions on upcoming challenges Saudi Arabia will face in the economic and development fields, for example the growth in population without an accompanying growth in economic opportunities. We concentrated in our discussions on the role of each of each of us present to improve the situation and help build a prosperous economy for the future.
Oil and natural gas feature prominently in prognostics on the Saudi economy in the upcoming years. There is, however, a gap which is growing every day and which cannot be filled by natural resources. This is where the vital role of investment and the private sector come into play. In effect, a need for additional training and the creation of job opportunities in new sectors has emerged.
Q: What are the secrets to your success, especially as you received an international prize for leadership in 2005 in the field of oil production?
A: In all honesty, the secret to Aramco’s success is its ethos. With its scientific background, the system the company is built on is one of the main reasons it has succeeded. We have to remember the company’s foreign history and admit its current success is a continuation of its past where foreign investment featured prominently. Through Aramco’s philosophy and traditions that ensure that helps employees succeed, his Excellency Ali Naimi, who joined the company at 11, was able to develop and move up the company’s ranks from an illiterate young man to an MA holder, with a degree in geology from Stanford University in the US, and finally, a businessman who became the first Saudi President of the corporation.
Personally, I joined an already successful company upon graduating from the American University of Beirut with a BA in Political Sciences. I did not have any relevant experience, but Saudi Arabia is full of opportunities for self development.
As the first Chairman without an engineering background, I haven’t found it difficult to learn and progress. I started in the Public Relations (PR) office and, in the mid-seventies, I was fortunate to be chosen as the PR Director for a government project involving Aramco to create a unified electric company in the Eastern Region. I was promoted to Director of Finances and then to Director General of this company that was established to serve as an example of modern electricity companies. Of course, I later returned to Aramco and found many opportunities. I became responsible for industrial relations and later, the head of global affairs which involves joint investments in refiners, international marketing, and the fleet of giant oil carriers.
When I became Chairman, the first challenge I faced was the excellent team of professionals at Saudi Aramco which nevertheless had ideas and priorities that differed from mine. My first task was to build a new harmonious team. The company benefits, nowadays, from one of the world’s best teams. I owe my success to the work of others around me. I believe the importance of the spirit teamwork has been conveyed to all of Aramco’s employees, from the highest ranks to the lowest.
One of the biggest problems that company chairmen face is that, while they might think as a leader, it is difficult to transmit these ideas to the frontline staff so they apply and believe in them. The vision we agreed on in our desert meetings, regarding the future of Aramco for the next 30 years, is now being discussed and applied between factory workers and engineers.
In general, I consider my personal success to be the result of a number of factors such as the availability of work in Saudi Arabia for those interested in progressing, the company’s success as an original and leading organization, the reliance on an excellent team around me, and the government’s continuing support.
Q: Aramco is sometimes accused of not being rigorously and independently audited. What is your reaction to this?
A: Fiscal auditing on the affairs of the company does not differ from that of any other commercial organization. We do not have any exception to the rule at Aramco.
The company has an administration and a Board of Directors, headed by the Oil Minister. Among the Boards Members are the Telecommunications Minister, the Secretary of the Higher Economic Council, Minister of Finance, and Dr. Abdul Aziz Mani’ who is a former Member of the Council of Ministers, in addition to members from inside the company, and other who used to head foreign corporations so as to ensure a variety of expertise and an international flavor to the Board.
I would like to stress that system of checks and balances at Aramco is no different than in any other corporation. As Chairman, I am responsible to the Board of Directors who monitors my performance and the company’s annual result. Naturally, there are internal and external auditors. The Higher Council for Oil and Minerals, headed by his Majesty King Fahd also has a vital role in monitoring our finances.
Q: In your opinion how do you grade Arab coverage of economic issues?
A: I think the Arab media suffer from a lack of specialization.
Q: What roles does Saudi Aramco play on the social, cultural, and environmental levels, in addition to being an economic giant?
A: I can safely say that our company, even in the days before it became Saudi owned, has always had a role in building schools, starting with government orders to build educational facilities in the Eastern Region to assimilate the Arab workforce’s children. This program continued after Aramco became a national company and so far, we’ve built one hundred and thirty five model schools, from elementary to secondary levels. I completed my secondary school education at the Aramco School in Khobar.
Q: Do you build schools or only finance them?
A: We are involved in building schools, and financing its operations and maintenance. In addition, in the cultural domain, Aramco television the second oldest station in the region, after Iraqi television, but now shut due to the multiplication of satellite televisions played an important role in the 1950s and 1960s. In addition, the company publishes its own magazine, “Saudi Aramco World” which is a high quality publication that caters for a predominantly Western readership and has presented Arab and Islamic culture and civilizations in its articles for over fifty years. There is also “Al Qafilah magazine” (the caravan) which has undergone tremendous change in the last three years, after I requested its shape and content are updated. Finally, there is Saudi Aramco Exhibition, more of a museum to the history of oil and gas industries in the Kingdom, visited by schoolchildren and heads of state alike. It has section on science and Arab and Islamic history.
Lately, Aramco has been involved in several social initiatives and is encouraging its staff to take part in programs to clean up the sea shore, for example, or visit the desert in the springtime.
Q: Are these services concentrated in the Eastern Region only?
A: You might think so but, in reality, our services are available in other regions where Aramco is present such as Riyadh , Jeddah, Yunbu, and Jazan. In another initiative, the company during Ramadan, encourages its employees to donate gifts to orphans. In a week, the company collected fourteen thousand presents. We organized a full day of activities and distributed the gifts to all the children.
At this point in the interview, I’d like to send a message to all your readers: Think of the oil and sectors as human industries because they are intimately connected to achieving economic prosperity and social development. On a recent visit to Brazil , I was asked, with a tone of reproach, by an audience member at a conference about my feelings as the director of an oil company. I answered that I am proud of being involved in the oil industry and chose to focus, beyond the environmental factor, on an infant in an incubator in hospital. Without the energy used by the hospital, that child couldn’t have received treatment. The oil business, I repeat, is a humanitarian business.
Q: What are the procedures followed by Saudi Aramco to protect the environment?
A: The company was founded at a time when the oil industry wasn’t subjected to environmental constraints. Aramco is one of the pioneering companies which put rules to safeguard the environment, many of which are still applied locally. No project is set up in the Kingdom without analyzing its effects on the environment, based on scientific studies we undertake. When I am asked on the subject, I am proud to reply that Aramco is Saudi Arabia ’s equivalent of a Green Party, because of our concerns for the environment.